Current through Reg. 49, No. 38; September 20, 2024
(a) General. The
State Securities Board, pursuant to the Texas Securities Act (Act), Section
5.T, exempts from the securities registration requirements of the Act, any
offer or sale of securities of an issuer made in compliance with Securities and
Exchange Commission (SEC) Rule 147A, 17 CFR § 230.147A, through a
registered general dealer or a registered Texas crowdfunding portal, provided
that all the requirements of this section are satisfied.
(b) Issuer. The issuer is not, either before
or because of the offering:
(1) A company,
that engaged or proposes to engage in the business of investing, reinvesting,
owning, holding, or trading in securities;
(2) Subject to the reporting requirements of
the Securities and Exchange Act of 1934, Section 13 or Section 15(d),
RSA
78m and §
RSA
78o(d); or
(3) A company that has not yet defined its
business operations, has no business plan, has no stated investment goal for
the funds being raised, or that plans to engage in a merger or acquisition with
an unspecified business entity.
(c) Offering. The offering must be made
exclusively through an Internet website operated by a registered general dealer
or registered Texas crowdfunding portal. All consideration received for all
sales of the securities in reliance on this exemption shall not exceed $1
million in a 12-month period. This amount is reduced by the aggregate amount
received for all sales of securities by the issuer in another offering that
does not take place prior to the six-month period immediately preceding or
after the six-month period immediately following any offers or sales made in
reliance upon this section.
(d)
Individual investments. The issuer will not accept more than $5,000 from any
single purchaser unless the purchaser is an accredited investor as defined in
§
RSA 107.2 of this
title (relating to Definitions). The issuer must have a reasonable basis for
believing that the purchaser of a security under this section is a Texas
resident and, if applicable, an accredited investor.
(e) Escrow or segregated account to safeguard
investor and issuer funds.
(1) All payments
for purchases of securities offered under this section are directed to and
deposited in an escrow account or a segregated account, if a segregated account
is permitted under paragraph (2) of this subsection. The payments must be held
in an escrow account or a segregated account until the aggregate capital raised
from all purchasers is equal to or greater than the minimum target offering
amount specified in the disclosure statement as necessary to implement the
business plan. Investors will receive a return of all their subscription funds
if the target offering amount is not raised by the time stated in the
disclosure statement.
(2) A
segregated account may be used in lieu of an escrow account if the maximum
offering amount is $1 million or less.
(3) For purposes of this subsection:
(A) An "escrow account" is one administered
by an independent escrow agent who is a bank or other depository institution.
(B) A "segregated account" is one
established by a registered general dealer or a Texas crowdfunding portal
pursuant to a written agreement ("Account Agreement") with the issuer and
provides that the registered general dealer or portal will act on behalf of the
issuer and investors to hold funds raised from investors in a specific
securities offering until such time as those funds can be disbursed in
accordance with paragraph (1) of this subsection. The Account Agreement must
identify the bank or other depository institution and account number where the
funds will be held. All signatories on the segregated account must be persons
registered with the Securities Commissioner.
(4) The escrow account or segregated account
must be in a bank or other depository institution located in Texas and
organized and subject to regulation under the laws of the United States or
under the laws of Texas.
(5) A
separate account must be set up for each securities offering in which a
segregated account is used in lieu of an escrow account. The Account Agreement
entered into in connection with a segregated account, shall include
requirements that the dealer or portal must, and the account shall be,
administered in accordance with the following principles requiring the dealer
or portal to:
(A) be responsible for prudent
processing, safeguarding, and accounting for funds entrusted to it by investors
and the issuer;
(B) act to the
advantage of and in the best interests of the investors and the issuer; and
(C) ensure that all requirements
of the Account Agreement between the portal and issuer are met before funds are
disbursed from the segregated account.
(6) The issuer shall inform all prospective
purchasers and investors if a segregated account is to be used to hold investor
payments. Additionally, a portal must make the disclosures mandated by §
RSA
115.19(c)(3) of this title
(relating to Texas Crowdfunding Portal Registration and Activities).
(f) Communications.
(1) All communications between the issuer,
prospective purchasers, or investors taking place during the offer of
securities pursuant to this section must occur through the Internet website of
the registered general dealer or Texas crowdfunding portal. During the time the
offering appears on the Internet website, the website must provide channels
through which potential purchasers and investors can communicate with one
another and with representatives of the issuer about the offering. These
communications must be visible to all those with access to the offering
materials on the Internet website.
(2) Notwithstanding the foregoing, the issuer
may distribute a notice limited to a statement that the issuer is conducting an
offering, the name of the registered general dealer or portal through which the
offering is being conducted, and a link directing the potential investor to the
dealer or portal's Internet website.
(g) Internet website.
(1) The registered general dealer or
registered portal shall give the Securities Commissioner access to the Internet
website operated by the dealer or portal prior to offering an investment
opportunity to residents of Texas and the website must remain accessible to the
Commissioner throughout the term of the offering.
(2) Information about the issuer and the
offering posted on the Internet website operated by the registered general
dealer or registered portal consists of:
(A)
a copy of the disclosure statement required by subsection (h) of this section;
(B) a summary of the offering,
including:
(i) a description of the entity,
its form of business, principal office, history, business plan, and the
intended use of the offering proceeds, including compensation paid to any
owner, executive officer, director, or manager;
(ii) the identity of the executive officers,
directors, and managers, including their titles and their prior experience and
the identity of all persons owning more than 20% of the ownership interests of
any class of securities of the company; and
(iii) a description of the securities being
offered and of any outstanding securities of the company, the amount of the
offering, and the percentage ownership of the company represented by the
offered securities.
(3) The information on the Internet website
required by paragraph (2) of this subsection must be made available to the
Commissioner and potential investors for a minimum of 21 days before any
securities are sold in the offering.
(h) Disclosure statement. A disclosure
statement must be made readily available and accessible to each prospective
purchaser at the time the offer of securities is made to the prospective
purchaser on the Internet website. The disclosure statement must contain all of
the following:
(1) Material information and
risk factors. All information material to the offering, including, where
appropriate, a discussion of significant factors that make the offering
speculative or risky. Guidance on the categories of information to include can
be found by reviewing the small business offering information provided by the
Texas State Securities Board on its Internet website. Topics to be addressed
include, but are not limited to:
(A) general
description of the issuer's business;
(B) history of the issuer's operations and
organization;
(C) management of
the company and principal stockholders;
(D) how the proceeds from the offering will
be used;
(E) financial information
about the issuer;
(F) description
of the securities being offered; and
(G) litigation and legal proceedings.
(2) Disclosures. The
issuer shall inform all prospective purchasers and investors of the following:
(A) There is no ready market for the sale of
the securities acquired from this offering; it may be difficult or impossible
for an investor to sell or otherwise dispose of this investment. An investor
may be required to hold and bear the financial risks of this investment
indefinitely;
(B) The securities
have not been registered under federal or state securities laws and, therefore,
cannot be resold unless the securities are registered or qualify for an
exemption from registration under federal and state law;
(C) In making an investment decision,
investors must rely on their own examination of the issuer and the terms of the
offering, including the merits and risks involved; and
(D) No federal or state securities commission
or regulatory authority has confirmed the accuracy or determined the adequacy
of the disclosure statement or any other information on this Internet website.
(3) Financial
statements. Issuers must provide current financial statements certified by the
principal executive officer to be true and complete in all material respects.
If the issuer has audited or reviewed financial statements, prepared within the
last three years, such financial statements must also be provided to investors.
(i) Notice filing.
Before using any publicly available Internet website in an offering of
securities in reliance on this section, the issuer shall file with the
Securities Commissioner:
(1) Form 133.21,
Crowdfunding Exemption Notice;
(2)
the disclosure statement, required by subsection (h) of this section;
(3) the summary of the offering,
required by subsection (g)(2)(B) of this section; and
(4) if investor funds are to be deposited
into a segregated account as permitted by subsection (e) of this section, a
copy of the written Account Agreement entered into between the issuer and the
registered general dealer or Texas crowdfunding portal that will hold investor
funds in the securities offering.
(j) Commissions and remuneration. A
commission or other remuneration shall not be paid or given, directly or
indirectly, for the offer or sale of the securities unless the person receiving
such compensation is registered in Texas as a dealer or agent or as a Texas
crowdfunding portal. The issuer may not list its securities on the Internet
website of a general dealer or portal that holds an interest in the issuer. The
issuer may not compensate a general dealer or a portal by providing a financial
interest in the issuer as compensation for services provided to or on behalf of
the issuer. A general dealer or portal may not be affiliated with or under
common control with an issuer whose securities appear on its Internet website.
Nothwithstanding the foregoing, a Registered Small Business Development Entity,
as defined in §
RSA
115.20 of this title (relating to Texas
Crowdfunding Portal Registration and Activities of Small Business Development
Entities), may have a financial interest in an issuer listed on its
Crowdfunding Web Portal, as defined in §115.20.
(k) Disqualifications.
(1) For purposes of this subsection, "control
person" means an officer; director; other person having the power, directly or
indirectly, to direct the management or policies of the issuer, whether by
contract or otherwise; or a person that owns 20% or more of any class of the
outstanding securities of the issuer.
(2) This exemption is not available if the
issuer, the issuer's predecessors, any affiliated issuer, or any control person
of the issuer:
(A) within the last five
years, has filed a registration statement which is the subject of a currently
effective registration stop order entered by any state securities administrator
or the United States Securities and Exchange Commission;
(B) within the last five years, has been
convicted of any criminal offense in connection with the offer, purchase, or
sale of any security, or involving fraud or deceit;
(C) is currently subject to any state or
federal administrative enforcement order or judgment, entered within the last
five years, finding fraud or deceit in connection with the purchase or sale of
any security; or
(D) is currently
subject to any order, judgment, or decree of any court of competent
jurisdiction, entered within the last five years, temporarily, preliminarily,
or permanently restraining or enjoining such party from engaging in or
continuing to engage in any conduct or practice involving fraud or deceit in
connection with the purchase or sale of any security.
(3) Paragraph (2) of this subsection shall
not apply if:
(A) the party subject to the
disqualification is licensed or registered to conduct securities-related
business in the state in which the order, judgment, or decree creating the
disqualification was entered against such party;
(B) before the first offer under this
exemption, the state securities administrator, or the court or regulatory
authority that entered the order, judgment, or decree, waives the
disqualification; or
(C) the
issuer establishes it did not know and exercising reasonable care, based on a
factual inquiry, could not have known that a disqualification existed under
this subsection.
(4)
This exemption is not available to an issuer if:
(A) a control person of the issuer is also a
control person of another issuer that has made a securities offering in Texas
within the previous 12-month period;
(B) a control person of the issuer is also a
control person of another issuer that is concurrently conducting a securities
offering in Texas; or
(C) the
proceeds of the offering will be combined with the proceeds of a securities
offering by another issuer as part of a single plan of financing.
